Eq: Large Cap

(New York)

The junk bond sector feels like it is on the precipice right now. After years of great performance, valuations and yields are at lofty levels. At the same time, there has never been more BBB bonds, or bonds just one notch up from junk. All of that means the market looks fragile. However, one of the lesser discussed risks in the high yield market regards a sea-change in accounting practices. Just as with startups, the high yield sector has seen major growth in suspicious accounting practices, such as inflating EBITDA to make debt multiples look lower. Often times this is done on a highly speculative basis that misleads investors.

FINSUM: This is just one of the many growing risks in the high yield market. It seems like the SEC needs to crack down on this sort of creative accounting.

(New York)

US dividend stocks are in a curious, if tenuous, positon at the moment. They have done well recently, but rate rises seem poised to bring prices down. Overseas dividend stocks, however, are not in the same predicament, as the rate environment in many other parts of the world is more benign. Accordingly, here are six overseas dividend stocks to consider: Allianz (4.1%), Hang Lung Properties (5%), Heidelberg Cement (2.8%), Nestle (2.9%), Royal Dutch Shell (5.3%), and Sanofi (4.1%).

FINSUM: Not only are these stocks attractive because of the good yields and mild rate environment, but they mostly have very attractive P/E ratios as well.

(New York)

US stocks have simply blown away the world this year. The S&P 500 is up around 9% while global shares are down 6%. The outperformance has been driven by a supportive tax policy, great economic performance, and a pro-business attitude out of the White House. However, JP Morgan says that the outperformance of US stocks relative to the globe is set to stop. US stocks and global ones will move towards parity in coming quarters as the stimuli helping American shares wanes. The parity will not come from global stocks catching up as much as the US will stagnate or fall.

FINSUM: When we take everything into account right now, we are feeling increasingly positive about the the next year. We think Democrats winning the House would be favorable for shares as it would calm money managers’ worries about some of the GOPs more extreme positions (e.g. trade war). This could bring on a “goldilocks” scenario, where the economic and political conditions are just right for stocks to move strongly higher.

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